A total of 201 MPs employ family members, putting an average £33,000 a year into family coffers, and 415 MPs claim for the cost of mortgage interest on second homes.

Under the draft plan, MPs would be able to claim for only the cost of renting a second home – and even then, only if it is more than 90 minutes’ journey time from Westminster.

Sir Christopher believes that only such ‘challenging’ reforms will restore public faith in the Commons in the wake of the MPs’ expenses scandal.

But officials have told him that the mortgage ban could force dozens of MPs to sell their homes. Although the average mortgage claim is £12,000 a year, many younger MPs are servicing much larger loans which account for the bulk of their £24,000 second-home allowance.

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The reforms are expected to be rubber-stamped by the Prime Minister and put in place by next April, just weeks before the expected General Election.

To compound their pain, Sir Christopher could force MPs to hand over any capital gain they have made on second homes. Because the reforms will not be applied retrospectively, MPs have a strong incentive to sell up now.

‘If these plans are applied to all MPs, there will be carnage,’ a senior Commons source said. ‘Come November, we will have a wave of MPs looking at their financial situation and deciding it is just not worth it.

On the House: Michael Gove has a huge loan on his constituency home

‘Many of those in the biggest quandary are Tory MPs with big mortgages on expensive houses in the South of England, some of whom would also have to find a new job for their wives who are their constituency workers.

‘If they think they stand a chance of a decent career under David Cameron, they will probably take the hit and get rid of their houses. If they don’t, they will go.

There are some good jobs on offer in the City for ex-MPs who know how the Tory Party works. For this reason, Sir Christopher is being lobbied to restrict the reforms to new MPs who come in at the Election.’

The slightly brighter news for MPs is that Sir Christopher does not support a ban on them taking second jobs, but he is considering stopping Ministers from working in an area related to their brief for up to five years after leaving office.

The practice of MPs employing family members became discredited after Tory MP Derek Conway was ordered to refund thousands of pounds paid to his two sons after an inquiry found no evidence that they had worked for their wages.

Among the MPs who would be hit by the ban are Defence Secretary Bob Ainsworth, who employs his wife Gloria as a caseworker; former Home Secretary Jacqui Smith, whose husband Richard Timney works as a Parliamentary assistant on a salary of between £27,780 and £40,052; and Environment Secretary Hilary Benn, whose wife Sally earns between £14,212 and £34,240 as a research assistant.

Some of the most senior figures in David Cameron’s Shadow Cabinet would be hit hardest by the ban on mortgage claims.

Last year, Education spokesman Michael Gove claimed £19,590 in interest on his house in his Surrey Heath constituency, which he bought for £395,000, indicating a mortgage close to 100 per cent of the property’s value.

The house was bought in 2006, close to the peak of the property market, so he faces making a loss on the home if he is forced to sell it.

In 2003, Shadow Chancellor George Osborne took out a £450,000 mortgage on his Tatton constituency home in Cheshire, bought for £445,000, leaving monthly interest payments of nearly £1,900 according to the most recent figures – although his private wealth would cushion him from having to sell.

Mr Cameron took a £350,000 mortgage on his second home in his Witney constituency in Oxfordshire in 2001, and has since paid off £100,000. Interest on the remainder accounts for the bulk of his £19,626 second-home claim, although again his personal fortune means he can afford it.